The "Economic Imperative" – Healthcare Delivery Must Be Transformed

Last week I participated in our fourth annual Connected Health Conference, held in Chicago. At this event we get together with hundreds of customers, partners, policy makers, and thought leaders from across the industry to talk about what’s going on in healthcare today – and what’s next.

A highlight of the conference for me was the opportunity to moderate a lively panel that included Phil Bredesen, Bill Hazel and Mike Leavitt . Given all the talk in Washington, DC and the states about how to rein in rising U.S. healthcare costs, it was great to hear from current and former officials from HHS and state governments on the forces driving evolving payment models and delivery system reform. They all agreed on this point – regardless of what happens with U.S. healthcare laws and regulations, the healthcare delivery system will change dramatically in the next 5-8 years because the current model is unsustainable. Mike Leavitt said it best – there is an “economic imperative” to change the healthcare system and “health reform is now economic reform.”

We need to drive additional value – better care for the same or lower costs – into our healthcare system. All the panelists agreed that to get to value, we must throw away the fee-for-service model, support greater transparency within the system, and enable innovation. The fee-for-service rules have stifled innovation by reinforcing volume over value -- reimbursing on a per-procedure basis rather than on the number of patients who remain healthy year over year.

Phil Bredesen emphasized the need to re-introduce “economic tension” into the system. When businesses and consumers purchase goods and services, they typically have the opportunity to balance what they want to spend with the value they perceive. Without transparency around cost and quality, healthcare purchasers can’t make informed choices. Bredesen’s view is that transparency will generate the required tension – improving healthcare dramatically.

I asked the panelists where innovation will come from. The consensus was that states and employers will drive change because they are desperate to figure out how to balance their budgets. Bill Hazel told a story about a manufacturing company with a significant population of diabetics. They’re working with local healthcare providers to drive change in the system – to address high costs, high absenteeism and ineffective care. The employer was clear – if the U.S. can’t figure out how to provide better value in the healthcare system, the company will be forced to move elsewhere.

A focus of our Connected Health Conference is innovation in technology. Craig Mundie, Microsoft’s Chief Research and Strategy Officer, gave a great presentation on the future of technology and its potential impact on healthcare, and a number of our customers and partners demonstrated significant progress in using technology to drive change in care delivery.

But, technology is only part of the story. As Leavitt explained, until recently “medical innovation” has been a new gadget, chemical or procedure. Now it’s about:

Innovating around defining and demonstrating a value proposition for stakeholders – Pay $1 today and get $1.50 tomorrow.

Innovating around collaboration – Networks of care teams are emerging, but successful collaboration requires the ability to split up a series of activities and a set of money in an orderly way.

It’s clear that change is coming. I’m excited about the potential to drive real value in the healthcare system – with innovative technology and innovative business models.